FTX Contagion: FTC Investigates Crypto Firms over Deceptive Ads

Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, during the Bloomberg Crypto Summit in New York, US, on Tuesday, July 19, 2022. The Bloomberg Crypto Summit brings together top names from the worlds of tokens, blockchain, Web3, NFTs, decentralized finance, economics, investing, venture capital, and more …
Jeenah Moon/Bloomberg/Getty

The FTC is reportedly investigating several cryptocurrency firms over allegations that their advertisements are deceptive or misleading. The investigation comes in the wake of the collapse of FTX, which had a slew of celebrity “ambassadors” suggesting its services to the general public.

FTC spokeswoman Juliana Gruenwald Henderson told Bloomberg News, “We are investigating several firms for possible misconduct concerning digital assets.” Henderson declined to offer further details on the probes.

Instagram/@kimkardashian

There are laws that require truth in advertising, which the consumer protection agency enforces. These include people needing to disclose when they have been paid for endorsements or reviews. Additionally, the SEC has its own rules for the disclosures that people must make.

In October, for example, Kim Kardashian settled with the SEC over a previous crypto promotion, agreeing to pay a $1.26 million fine over charges that she promoted a cryptocurrency on Instagram without disclosing that she had been paid $250,000 to do so.

Moreover, the embattled cryptocurrency exchange FTX has been sued by investors for false advertising, among other allegations, following the collapse of the company by its disgraced founder, Sam Bankman-Fried.

As Breitbart News reported last month, cryptocurrency investors are suing celebrity endorsers such as NFL star Tom Brady, his ex-wife model Gisele Bündchen, comedian Larry David, David Ortiz, Steph Curry, and Shaquille O’Neal, among others, following the collapse of FTX.

FTX was “ultimately a Ponzi scheme, misleading customers and prospective customers with the false impression that any cryptocurrency assets held on the Deceptive FTX Platform were safe and were not being invested in unregistered securities,” the lawsuit states.

In March, UK regulators warned more than 50 companies over misleading crypto advertisements, Bloomberg reports. Months before that, the UK’s advertising authority found that ads by the crypto exchanges Coinbase and Kraken were misleading. The Arsenal Football Club Plc was also accused of misleading its fans about crypto tokens.

You can follow Alana Mastrangelo on Facebook and Twitter at @ARmastrangelo, and on Instagram.

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